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Many American drivers got a bit of a break on car insurance costs last year.
Driving has decreased during the COVID-19 pandemic, and annual car insurance premiums fell an average of 4 percent in 2020, to $1,483. That's according to a new study by The Zebra, an insurance comparison site. Nearly two out of three drivers (65 percent) paid less for coverage.
Still, that dip in rates, the first since 2013, may not do much to slow the rising cost of car insurance over the long haul. Since 2011, average annual premiums have increased 24 percent. But there are steps you can take to keep your own car insurance costs down.
The amount you pay for coverage is closely tied to several factors, including your state and city, the study found. Although many regions saw decreased costs, the average rate rose sharply in several states.
And as recent research by Consumer Reports has found, some auto insurers base their quotes on factors such as the level of education and job, which may mean higher costs for those with less schooling or less prestigious job titles.
Another factor is the growing amount of data that insurers have about you, gathered through devices that transmit information about your driving habits to your insurer, says Nicole Beck, director of communications at The Zebra and a licensed insurance agent. For some people, that could lower their rates, especially if they drive carefully. But those who routinely drive fast or brake hard could end up paying more.
The study analyzed more than 83 million car insurance rates from across all U.S ZIP codes between September and December of 2020. The rates were based on premiums for a single 30-year-old male driver with a good driving record.
That driving profile may be different from yours, which makes it all the more important to understand how your rates are calculated and how to minimize your premium costs, Beck says.
A Divergence in Rates
The cost you pay for insurance is driven by a number of factors, including the region where you live, weather events (such as wildfires and hurricanes), local crime rates, and the percentage of uninsured drivers.
Those variables have led to a wide divergence in rates. Last year, for example, premiums fell in 33 states. The three largest declines were in Kentucky (-16.2 percent), South Dakota (-17.3 percent), and Michigan (-18.4 percent). The decline in Michigan stemmed from a new law change that reduced rates.
By contrast, rates rose in 17 states and Washington, D.C. The states with the biggest premium hikes included Alaska (7.2 percent), Idaho (8 percent) and Maine (17.7 percent).
Michigan ranked as the most expensive state for coverage in 2020, with an average premium of $2,535, followed by Florida ($2,324), and Louisiana ($2,304). Insurance in Ohio was the least expensive, with an annual rate of $926.
Your personal finances, including your job and credit score, can also have a big impact on your coverage costs, along with your driving history. With more Americans distracted by phones and other devices, insurers are penalizing drivers caught texting or using a phone behind the wheel.
The type of car you drive and its age are additional factors. Expensive models will generally cost the most to insure. Hybrid or electric vehicles tend to push up premiums due to the cost of repairs or replacement.
Repair costs mean that new safety technology, such as lane departure warning and automatic emergency braking, may not lead to significant discounts in premiums. (Get more insights into the hidden costs of car safety features.)
"Vehicle glass replacements that would have once been below a deductible are now in excess of deductibles," said Jon Cardi, senior vice president of strategic client sales and support at Safelite Solutions, an insurance claims processing firm, in an email.
Controlling Your Costs
Despite the cost of coverage, many people tend to stick with their current insurer instead of shopping around for a better deal.
As a 2019 Consumer Report survey found, 54 percent of our members had remained with their current company for 15 years or longer. But it's essential to compare rates annually. Follow these guidelines for a better deal:
1. Shop strategically. Start by contacting direct-writer insurers, those that have their own agents and offer competitive prices, such as Amica and USAA. Then go to an independent agent to see if he or she can find a better rate through a different insurance company.
2. Choose a top-rated insurer. A low premium isn't the only key factor; you also want an insurer that provides fair and fast claims settlements, good customer service, and help and advice. You can see how carriers stack up on these measures in our car insurance ratings.
3. Don’t skimp on essential coverage. Make sure you carry enough liability coverage, which pays for bodily injury and property damage that you may cause to someone else in a crash. Get more than the legal minimum even if you don’t have much in assets to protect. Depending on your state, a portion of your wages could be garnished in a judgment against you.
You can get more details on this and other coverage to consider in our car insurance buying guide.
4. Look for cost-cutting options. Choosing a $1,000 comprehensive and collision deductible instead of $500 can reduce your costs by 11 percent, according to The Zebra. If your car is older, consider canceling your collision and comprehensive altogether, because you could end up paying more than you would get back in repair or replacement costs.
5. Be a careful driver. Driving violations or claims can push your rates up sharply. Texting or using a cell phone while driving can hike your premium by more than 20 percent, according to the study, and an at-fault accident can result in a 31 percent increase. Get a citation for reckless driving? Expect your rates to soar by 61 percent.